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Alarm bells ringing: World food prices rising

With the 2008 food-price riots in developing nations still fresh in mind, non-governmental agency analysts are wary of where this year&rsquo;s diminishing U.S. corn yields might lead.
With much of U.S. farm country under a punishing drought -- along with reports that world food prices have gone up some 6 percent in the last few weeks -- corn prices have spiked.

With the 2008 food-price riots in developing nations still fresh in mind, non-governmental agency analysts are wary of where this year’s diminishing U.S. corn yields might lead. With much of U.S. farm country under a punishing drought -- along with reports that world food prices have gone up some 6 percent in the last few weeks -- corn prices have spiked.

Following several consecutive USDA reports showing corn stocks and yields dipping, the U.S. ethanol production quota is under fire and waivers have been requested from the EPA. The ethanol industry’s advocates have pushed back hard against the idea that such a waiver would ameliorate the tight supply of corn.

While U.S. row crops bake in the field, the potential repercussions are being considered. Also in the mix are concerns that countries, citing the need to protect homegrown food stores, could refuse to export commodities like India and Russia did in 2010. This would only exacerbate the problem of rising food prices.

Farm Press spoke with food price expert Gawain Kripke, director of policy and research for Oxfam America, shortly before the release of the latest Food Price Index report from the UN’s Food and Agriculture Organization (FAO). Kripke spoke about the food-deficient hot spots being watched, why the world’s poor are especially vulnerable to rising food prices, and why the situation is on a “knife’s edge.”

“There are several food price indexes and each take slightly different approaches – how they weight oils versus cereals and other things -- and get slightly different results. But they’re generally pretty consistent in their findings.

“The FAO’s is generally the most widely-used internationally looking at food prices globally. It looks at key commodities in international markets and where prices are.

“The index is a big signal to markets, policymakers and countries thinking about food prices and what is going to happen in the future. When these are released, everyone pays attention.”

“What we know is things look rough – not only in the United States but in several other important markets. (Those include) central Asia, Russia and India.

“With production down and demand still increasing and recovering from the recession, expectations are we’ll see increases in food prices, commodity prices. That’s worrisome.

“It feels as though we’re on the knife’s edge of a crisis. We had a crisis in 2007 and 2008 and it hasn’t felt the same yet in 2012. But we only need a few more pieces of bad news before we might see some real panic.”

When you say “panic” are you worried about government instability? Mass migration?

“In 2007 and 2008, we saw a significant amount of civil disturbances. Food riots occurred in more than 30 countries around the world. It was probably a contributing factor in at least two government overthrows.

“(Government instability) is a possibility if things get worse.

“More importantly and generally, though, poor people already face terrible stress. Almost one billion people already don’t get enough food to eat. But if food prices continue to rise, that means poor people will be stretched even thinner to meet basic nutritional needs. In many cases, they’ll have to go without.

“For us, that’s a crisis. It may not be a crisis for many others but a billion hungry people is a daily crisis and it only gets worse with rising food prices.”

When you say “poor” what differentiates someone in that category exactly? Someone making less than $2 per day?

“Most definitions have to do with cash income. The World Bank definition is (a salary) of $1.25 per day to describe absolute poverty. A broader definition allows for $2 per day.

“By those definitions, there are somewhere between 1.5 billion to 2.5 billion people that are poor.

“That level of poverty that those in the United States can’t (fathom) but is prevalent in many countries in south Asia and Africa. For those people, they’ll spend 50 to 60 percent of what little income they have on food.

“So, when food prices go up 10 percent, 20 percent or 50 percent, those people must make terrible choices about their consumption. That means less food, less medicine, or they can’t pay school fees for their kids.

“Food prices have a really huge impact on poor people. It’s a disproportionate impact because they spend more of their income on food.

“In America, we spend something like 10 percent on average of our income on food. Here, food prices increases might be a nuisance and a hassle. But for most Americans, we won’t live or die, go to school or not, get healthcare or not, based on food prices.

“For close to one billion people, though, that isn’t the case.”

Crises and hot-spots

On the newly-released Oxfam briefing document on six developing regions/countries – Yemen, the region of west Africa, Bolivia, Guatemala, Mexico and Brazil -- and how they’re currently faring…

“We’re doing a sort of quick, short survey across our own programs. Oxfam has offices and programs in about 90 countries. So, we’re keeping an eye out across those programs on how food prices are having impacts on our programs and in the countries.

“This is a snapshot of things that are happening. Not every country is equally affected.

“In 2007/2008, rice prices were very high. Now, rice isn’t nearly as high while corn and wheat prices are much higher.

“That has different impacts depending on what each country eats. Wheat, for example, is the main staple of north Africa. Yemen is a country particularly vulnerable to rising wheat prices.

“Corn is eaten in much of Africa along with parts of South America.”

On moving from crisis to crisis and not addressing underlying causes…

“The frustration we have is we spend so much time, effort and money dealing with crises. Often, we don’t even get to middle- or long-term solutions.

“It’s especially frustrating to see ourselves on the edge of another crisis – after 2007 and 2008 – having taken so little action since.

“Because of the emergency nature of this – people literally need food urgently. You can’t ignore that and you must respond. That takes up a lot of our time, energy and money.

“At best, though, we know that is a stop-gap and we need to take bigger measures.

“In 2008/2009, there were a series of conferences around the world – big international summits in Rome, Madrid and at the G-8. Many heads of state said “we must never allow this again. We must take steps and action.” There was a sense that we’d learned our lesson.

“I’m afraid we’ll be back in the same place, saying almost the same thing this year and next. We haven’t taken those necessary steps.”

Hot-spots you’re really watching?

“The one that’s been emerging this year is the western Africa region of the Sahel – the area just south of the Sahara. That has experienced a bad drought and is very poor. They’ve had problems in the past but this is more widespread and seems to have deepened.

“The Sahel is coming to the end of their dry season and moving into the rainy season. We’re hoping the rains might offer some relief.

“In the Horn of Africa, in the eastern part of Africa, there was a famine in Somalia in 2011. The rains haven’t been that good there. That’s led to a lot of food insecurity, still a lot of displaced people. That area has slipped from the headlines but it remains very stressed and could get worse.

“I’ve already mentioned Yemen. You tend to think of the Arabian Peninsula as very rich with oil. But there are some very poor countries and people there.

“Yemen is very poor and dependent on imported wheat. As wheat prices rise, we’re very concerned about a food crisis there. Of course, Yemen has also had a lot of conflict with Al Qaida and other conflicts there. Higher food prices are a contributing factor to the instability.

“Afghanistan is also dependent on imported wheat and has a high level of undernourished people. Access to people becomes very hard in the winter. We need to make sure there’s enough access to food there.

“Governments must respond to their people. But in 2007/2008, some of the government actions really exacerbated problems globally. When Russia and India put export restrictions on food that sort of outsourced their problems to the countries that were trying to import that food.

“We’re watching closely to see if countries like India or Russia put measures like that in place again. That’s kind of what set off panic in 2007, when countries took such measures.”